DP466 A Chaotic Monetary Model of the Exchange Rate
|Author(s):||Paul De Grauwe, Hans Dewachter|
|Publication Date:||October 1990|
|Keyword(s):||Chaos, Chartism, Fundamental Analysis, Monetary Exchange Model|
|Programme Areas:||International Macroeconomics|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=466|
We use a monetary (Dornbusch) model of the exchange rate and introduce speculative dynamics, in which fundamentalists and chartists interact. The resulting non-linearities in the model produce `chaotic' behaviour of the exchange rate. We also analyse the effects of money-stock surprises in such a model. Finally, we study the behaviour of the exchange rate when `news' occurs infrequently.